Strategic leadership towards sustainability - individuals, organizations, and communities using systems thinking to create a better future that is peaceful, healthy, prosperous, just, equitable, and resilient for generations to come.

Saturday, October 30, 2010

Prop 23 & Green Jobs

A friend sent me a recent Opinion piece from the Wall St. Journal titled "Prop 23 and the Green Jobs Myth" by T.J. Rodgers - founder and CEO of Cypress Semiconductor, which acquired SunPower Corp - one of our country's largest solar companies - in 2003.

Image source: Solar Richmond, www.solarrichmond.net

In the piece, Rodgers supports the fossil-fuel industry-backed Prop 23 by essentially trying to tie it to California's economic troubles, and claiming it will hurt job growth. I can appreciate the position that putting a direct price on pollution can look like an added cost, but I hold that it's correcting a market distortion - we are and will continue to pay the costs of extracting and burning fossil fuels whether we do so directly (by pricing carbon) or indirectly (through healthcare, destruction of personal property & infrastructure, loss of life, undermining ecosystem services, etc.).

Attempts to tie a direct line from AB 32 (California's climate change legislation) to the state's current economic woes are disingenuous. First, the law hasn't gone into effect yet. Second, the initial targets of AB 32 are so easy to meet, that the costs will be more than offset by cost savings from efficiency upgrades and better processes. I know Econ 101 tells us that business would already have realized all of those cost-savings if the potential was there, but businesses are run by people, and as we know people aren't always perfect - the vast majority of businesses have huge unrealized opportunities for cost-savings with little or no upfront investment.

For example, EDF's Climate Corps program hires MBA students to help big companies identify efficiency opportunities - this year 50 interns generated $350 million in savings for these companies. Starting to send the price signal to the correct source - which AB 32 will do, and which Prop 23 is trying to stop - will accelerate these efforts and further innovations to make our economy more efficient, more effective, and more competitive.

At Cisco Systems, fellow Emily Reyna developed a plan
for installing energy-saving devices in R&D labs that
could save an estimated $8 million per year (with an
18-month payback) and reduce Cisco’s greenhouse
gas emissions by 3%. Source: EDF

I also disagree with the suggestion that the green jobs that AB 32 (and other policies like it) will promote, are a false promise. I do think most reports on both sides of this topic require a lot of assumptions and aren't perfect. Still, here's one that finds that policies that incentivize more efficient energy use -- it looks at the case of California, where energy efficiency policies from 1977-2007 created 1.5 million jobs while eliminating fewer than 25,000: http://www.nytimes.com/2008/10/20/business/20green.html. An overview of some other studies that show the expected job growth impacts of AB 32 is available in this Climate Progress post.

In his piece, Rodgers talks about how SunPower moved manufacturing offshore because of the "high cost and red tape" of manufacturing in the US. This opens up another whole conversation, but I think this rationale eludes the basic point -- labor's inexpensive in places like the Philippines and Malaysia (where their plants are) because wages and the general standard of living is very low. That's obviously not what we want for California and Californian workers. More to the point, the piece only talks about the jobs manufacturing solar panels -- the real appeal of green jobs is that most of them can't be outsourced - the jobs installing and maintaining the solar panels (as well as financing the solar panels, weatherizing houses, lighting retrofits, installing green roofs, farming local foods, etc. etc.)

The piece also claims European subsidies that have helped support the market for renewable energy there have had a net-negative impact on jobs. Here is a White Paper from the National Renewable Energy Lab refuting the study cited to support this claim. Much of the growth in the solar market (and presumably SunPower's revenue) over the past 5 years can be attributed to these policy structures of the major solar markets in Germany and Spain. In 2003, when Cypress acquired SunPower it was losing money - outsourcing jobs likely had some impact in turning that around, but I'd wager a much stronger driver was the solar market exploding over that time -- due in no small part to these policies and Europe's cap & trade system, as well as the awareness building that hundreds of groups have done on the true costs and impacts of fossil fuels.

Of course, it's surprising to read a piece supporting Prop 23 authored by the Chair of solar company, as it's so clearly bad for the company's growth. It reminds me of Tony Hayward who said when he took over BP: "We had too many people trying to save the world" (http://www.huffingtonpost.com/kevin-grandia/bp-ceo-hayward-we-had-too_b_585610.html) -- he promptly went to work trying to turn that around, getting super-efficient in a traditional, linear sense, and cutting corners to disastrous effect.

Here are a few of yesterday's headlines from Point Carbon, that covers the full-fledged carbon market that has been in effect in Europe for 5 years. The second one makes a very flexible system even more flexible -- the companies impacted by this will likely make a lot more money than they currently are as a result. The third one removes any legitimacy of trying to tag cap and trade as a "tax".

California to give away majority of allowances Published: 29 Oct 2010California will hand out most of its allowances at the start of its cap-and-trade programme.

I respect Mr. Rodger's leadership of SunPower Corp, and hope he will come around and see how policies like AB 32 (or anything that puts a price on carbon) will help his company, and create jobs and improve efficiency and competitiveness.

Finally, the piece states: "While our state government frets over issues like... the habitat of the red-legged frog, our economy—the habitat of homo sapiens—is a disaster." This brings up the most essential point. We need to really internalize the reality that the economy is a wholly-owned subsidiary of the biosphere. The red-legged frog's habitat and our habitat are one and the same. Without policies like AB 32 we will degrade that habitat to the point where it won't be able to support our civilization - and at that point it won't matter how many jobs we were or weren't able to create in the short-term. Luckily, these policies will create jobs and create a whole new economy that is sustainable for the long term.